Spending on Digital Transformation in 2017 Will Reach $1.2 Trillion

A new update to the Worldwide Digital Transformation Spending Guide from IDC forecasts worldwide spending on digital transformation (DX) technologies to be more than $1.2 trillion in 2017, an increase of 17.8% over 2016. IDC expects DX spending to maintain this pace with a compound annual growth rate (CAGR) of 17.9% over the 2015-2020 forecast period and reaching $2.0 trillion in 2020.

"Changing competitive landscapes and consumerism are disrupting businesses and creating an imperative to invest in digital transformation, unleashing the power of information across the enterprise and thereby improving the customer experience, operational efficiencies, and optimizing the workforce," said Eileen Smith, program director in IDC's Customer Insights & Analysis Group.

"In 2017, global organizations will spend $1.2 trillion on digital transformation with discrete and process manufacturers contributing almost 30% of this spending, while the fastest growth will come from retail, healthcare providers, insurance, and banking," added Smith.

The technology categories that will see the greatest amount of DX spending in 2017 are connectivity services, IT services, and application development & deployment (AD&D). Combined, these categories will account for nearly half of all DX spending this year. However, investments in these categories will vary considerably from industry to industry. The discrete and process manufacturing industries, for example, will invest roughly 20% of their DX budgets in AD&D and another 12-13% in IT services while the transportation industry will devote nearly half of its spending to connectivity services.

The fastest growing technology categories associated with digital transformation over the five-year forecast are cloud infrastructure (29.4% CAGR), business services (22.0% CAGR), and applications (21.8% CAGR). And, despite a CAGR that is slower than the overall market (17.3%), AD&D spending will grow fast enough to overtake IT services as the second largest DX technology category by 2020.

More than half of all DX investments in 2017 will go toward technologies that support operating model innovations. These investments will focus on making business operations more responsive and effective by leveraging digitally-connected products/services, assets, people, and trading partners. Investments in operating model DX technologies help businesses redefine how work gets done by integrating external market connections with internal digital processes and projects. The second largest investment area will be technologies supporting omni-experience innovations that transform how customers, partners, employees, and things communicate with each other and the products and services created to meet unique and individualized demand.

On a geographic basis, Asia/Pacific (excluding Japan) will see the largest investments in 2017 with 37% of the worldwide total. DX spending in this region will be led by the discrete and process manufacturing industries as well as professional services firms. The United States will be the second largest region with 30% of the worldwide total, led by professional services, discrete manufacturing, and the transportation industries. Latin America and the Middle East and Africa will experience the fastest growth in DX spending with five-year CAGRs of 23.4% and 22.6%, respectively.